|
Dr. Ashok Kumar Gupta Associate Professor (ABST), Govt. Commerce College, Kota (Raj.) |
Dr. Meenu Maheshwari Assistant Professor Deptt. of Commerce and Management, University of Kota, Kota (Raj.) |
Mrs. Sudarshana Sharma Research Scholar, Govt. Commerce College, Kota (Raj.) |
Abstract:
The
performance of an organization in terms of Customer’s experiences with the
value created by them is measured through Customer Perspective of Balanced
Scorecard. Strategic focus areas under this perspective are achieving high
customer satisfaction, customer retention, growth in customer’s accounts,
improving market share, providing best after sales services etc. This research
paper focuses on importance of Customers Perspective of Bank’s Balanced
Scorecard and aims to identify the significant difference between and among
Public Sector Banks and Private Sector Banks on this perspective. For
accomplishing the objectives of the study, a sample of 10 Public Sector Banks
and Private Sector Banks has been selected. 8 variables for 4 strategic
objectives have been selected to measure the performance on customer
perspective. Data have been compiled through secondary sources. Performance is
then measured and scored on the basis of performance scale. Hypotheses have
been tested through non-parametric methods using IBM SPSS22. A significant
difference has been found among Public Sector banks and among Private Sector
banks when an inter-bank comparison has been drawn and no significant
difference has been found between Public Sector Banks and Private Sector Banks
when an inter-sector comparison has been drawn. Latter part of the paper
includes the recommendations given for improvement in strategic performance on
customer perspective of the Indian banks.
Introduction:
Banks in India are becoming more
strategically focused and technologically advanced in order to respond to
customer expectations and improve their market share as against increased competitors.
The desire to become “Digital Bank” has forced them to put emphasis on
digitizing core business processes, reassess organizational structures, offers
technologically advanced and differentiated products & services through
enhanced multiple digitalised delivery channels.
In a revolutionary financial
services arena and changed strategic focus, banks are required to focus on
effective execution of the strategies, improving strategic performance on
continuous basis and achieving the strategic objectives in the long run. Measuring
and managing strategic performance has become vital to survive in the
competitive and rapidly fluctuating environment. There is a need for
comprehensive performance measurement and management that focus on both the
financial and non-financial aspects of the strategies of the banks as both
aspects play an important role in achieving long-term success & growth.
Balanced Scorecard has evolved as a
fruitful comprehensive tool of performance measurement and management which encompasses
and measures the performance of an organization on four key strategic areas
named Financial, Customer, Internal Business Processes, and Learning &
Growth Perspective.
Customer
Perspective is one of the important
perspective of the Balanced Scorecard as the importance of focus on customers
and their satisfaction have increase in current businesses. This perspective
measures the performance of organization in terms of customers’ experiences
with the value created by the organization. In this perspective companies
identify the target customers and market segments in which they have chosen to
compete and try to deepen the relationship with them through identifying and
delivering them value prepositions required by them. Banks being a service
industry, customers plays an important role in the operations of the banks.
Banks that meet the needs of the customers and provide high customer
satisfaction through excellent services can only compete and make high profits.
These days banks interact customers mainly through electronic means such as
debit cards, credit cards, internet banking, mobile banking, multifunctional
ATM’s, e-kiosks etc. To keep the customers active for the long run it is
necessary for banks that they should provide innovative products & services
as per their preferences, on time and with quality services & technological
excellence at a reasonable cost. The strategic focus of banks on this
perspective moves around achieving high customer satisfaction, customer
retention, growth in customer’s accounts, improving market share, providing
best after sales services etc.
Review
of Literature:
Following studies have been gone
through to identify the research gap:
Sanjeev
Kumar (2011) examined the awareness level and
opinion of the bank management on existing and new performance measurement
systems in Indian Banking Sector. The study also tried to know extent of usage
of Balanced Scorecard in performance measurement systems in the Indian Banking
Sector. Findings with regard to Customer perspective revealed this perspective
as an important perspective under non-financial perspectives by bankers from
both Private and Public sectors. Bankers considered customer satisfaction
level, customer retention, market share, know your customer and customer
complaints as important measures under customer perspective.
Panicker
and Seshadri (2013) devised a Balanced
Scorecard to determine the performance of Standard Chartered Bank and
highlighted the importance of viewing performance from other perspective in
addition to the financial perspective. It was found that score on financial
perspective improved from 2009-2011 then declined in 2012. No significant
improvement has been seen in internal business process perspective scores. The
customer perspective scored the worst while score on learning & growth
perspective was better than other perspective. With the increased demands from
stakeholders, financial sector analysts, educators and practitioners, the BSC
shall be widely used in the banking sector in India. More studies are needed to
identify the relevant measures of the BSC for the Banking Sector.
Rameesha
Kalra (2015) intended to evaluate the
performance of public and private sector banks on tangible as well as
intangible aspects so that a comprehensive picture of business operation from
quantitative and qualitative terms can be known. The study with respect to
customer perspective found that the level of customer satisfaction and service
quality of private sector banks was found to be higher than public sector banks
although the customer base of public banks was the maximum than private sector
banks. It has been concluded that Customer satisfaction was the major
contributor of bank performance followed by internal business perspective and
then learning & growth perspective. All perspective together contributes in
achieving high level of performance of banks. Public sector banks were
suggested to improve their service quality and conduct surveys to identify service
quality and customer satisfaction at regular intervals.
Dincer,
Hacioglu and Yuksel (2016) evaluated the
performance of 33 deposit banks of Turkish through BSC using Analytic Network
Process Approach and determined which perspective of Balanced scorecard are
more significant with respect to the state banks, private banks and foreign
banks. It was found that the financial perspective of BSC has the first rank
with 65.7%, customer perspective stood at the second rank with 22.1%,
learning& growth perspective stood at the third rank with 6.3% and internal
factors has the weakest importance with 5.9%.
S.
Visalakshmi (2016), in her doctoral thesis
attempted a descriptive research to measure the performance of commercial banks
in India using four perspectives of the Balanced Scorecard and to identify the
factors that influences customer’s trust and loyalty and lead to learning &
growth of employees and better internal processes in banks. Findings on
customer Perspective revealed that State Bank of India had been ranked first
and Bank of Baroda on second on customer perspective as the customers of these
banks were found very much satisfactory with the services of the banks whereas
HDFC bank was ranked on last position and South Indian Bank on second last as
the customers were only satisfied only. It has been observed and concluded that
Customer Perspective alone can affect the financial results but this is not
sufficient for future sustainability. It requires long term focus on learning
& growth perspective and improvement in Internal processes which will lead
to long-term benefits for the organization. Banks were suggested to improve
their operations ad to focus on improving their customer services. Employees
must be trained enough to improve the responsiveness and competitiveness to
handle customer complaints & grievances efficiently.
Annapurna
and Manchala (2017) evaluated the performance
of New Generation Private Sector Banks named ICICI, HDFC and Axis bank using
different variables of four perspectives of Balanced Scorecard during the year
2006-2015. The study revealed HDFC bank performed good on financial perspective
and ICICI and AXIS bank’s performance was moderate on customer perspective.
ICICI and Axis bank performed good on two variables out of three variables in
internal business perspective. ICICI bank was a good performer in Learning
& Growth Perspective of BSC. They suggested that banks should try to
improve their performance on all the perspectives of BSC to improve the overall
performance.
Research
Gap:
After reviewing the concerned
literature specifically on customer perspective of Balanced Scorecard in banking
sector, it has been found that only few studies have been conducted in Indian
context on Balanced Scorecard and no particular study specifically on customer
perspective have been conducted. No studies have been conducted using the
selected study years. The sample size taken in reviewed studies was confined to
few banks only.
Research
Methodology:
A.
Objectives
of the Study:-This research paper aims
1.
to throw light on
importance of Customer Perspective of Balanced Scorecard.
2.
to examine, compare and
identify the significant difference in the performance of Public and Private
Sector Banks on Customer Perspective.
3.
to suggests for
improvement in the performance of Customer Perspective of the Indian Banks.
B.
Sample
Size: -The sample size of the study comprises
of top 10 Public and 10 Private Sector Banks which have been selected on the
basis of highest market capitalization in BSE Sensex. The Public bank includes SBI,
Bank of Baroda, Punjab National Bank, IDBI bank, Canara bank, Bank of India,
Indian Bank, Central bank of India, Union Bank of India and Syndicate bank. The
Private Bank includes HDFC Bank, ICICI Bank, Axis Bank, Indusind Bank, Yes
Bank, Kotak Mahindra Bank, Federal Bank, City Union Bank, RBL Bank and Karur
Vysya Bank.
C.
Study
Period: - The study period for the study
includes 10 consecutive financial years from 2007-08 to 2016-17.
D.
Data
Collection:Secondary data have been chosen as
a base for the study which has been collected through annual reports of the
sampled banks, Business responsibility reports, sustainability reports, various
publications of RBI, different websites, journals, articles, reports etc.
E.
Hypotheses
of the Study:The following inter-bank and
inter-sector hypothesis has been framed for this research paper:
Inter-Bank Hypothesis
H0-There is no
significant difference in the performance on Customer perspective among Public
Sector Banks and among Private Sector Banks.
H1- There is a
significant difference in the performance on Customer perspective among Public
Sector Banks and among Private Sector Banks.
Inter-Sector
Hypothesis
H0- There is no
significant difference in the performance on Customer perspective between
Public and Private Sector Banks.
H1- There is a
significant difference in the performance on Customer perspective between
Public and Private Sector Banks.
F.
Data
Analysis Procedure and Techniques:
For a comparative analysis between
Public and Private Sector Banks on Customer Perspective, 8 measures under 4
strategic objectives related to customers have been selected. Then performance
for each measures for each study year has been calculated separately. A
performance scale has been designed on the basis of performance and a total
score of 400 (a maximum score of 50 for each measure X 8 measure) for customer
perspective has been finalised. Score has been assigned as per the performance
in each year and total score has been considered for inter-bank comparison and
average score for inter-sector comparison. To test the hypothesis of the study
non-parametric methods Kruskal Wallis and Mann-Whitney U test has been applied
using IBM SPSS 22.
G.
Variables/Measures of the Study:
|
Strategic
Objectives |
Measures |
|
Achieving
high Business and Customer Growth Rate |
Deposits
Growth |
|
Credit
Growth |
|
|
Increasing
Customer Growth Rate in Low Cost Funds |
Saving
A/c |
|
Current
A/c |
|
|
Casa
Ratio |
|
|
Providing
Excellent after sales services |
Complaints
Redressed Ratio |
|
Increasing
Market Share in |
Deposits |
|
Advances |
H.
Limitations of the Study:
1.
Customer Satisfaction, customer
retention and customer loyalty are the three important measures of Customer
Perspective which must be incorporated into BSC of Banks. As this study is
secondary data base and these measures required primary data for measuring
performance on these variables.
2.
To measure the Customer Growth rate, growth in deposits and credit accounts
have been considered as the data for customer growth rate was not disclosed by
all the sampled banks in their reports.
3.
To avoid the unnecessary length of the
paper intra-bank comparison on customer perspective of each bank has not been
included.
Data Analysis and
Interpretation:
Inter-bank
and Inter Sector Comparison of Public Sector Banks and Private Sector Banks on
Customer Perspective
For inter- bank comparison of
Public Sector Banks and Private Sector Banks in India on Customer perspective
of Balanced Scorecard, performance score of each bank on all selected measures
of Customer Perspective has been calculated based on their performance for each
year and summed up and used for statistical inferences. For inter-sector comparison,
average score of each bank for last 10 years on customer perspective has been
used for drawing statistical inferences.
1.1
Inter-Bank Comparison of Performance of Public Sector Banks on Customer
Perspective
Table :1 Performance
Score of Public Sector Banks on Customer Perspective
Table :2 Mean ranks of
Public Sector Banks
Table : 3 Results of
Kruskal Wallis test for Public Sector Banks
|
Chi-Square |
Degree of freedom |
p-value |
|
|
Public Banks |
47.59 |
9 |
0.000 |
Major Findings: Table
2 shows that
1.
State Bank of India
followed by Bank of Baroda performed the best on Customer perspective among all
public sector banks as the mean rank was the highest i.e. 84 for SBI and 75 for
Bank of Baroda. The performance score of both the banks was the highest than
other public sector banks in almost each year as shown in Table 1 primarily due
to high customer base in deposits and credit accounts as compared to other
public banks, better competitive position due to high market share in deposits
and credits, satisfactory after sales services and query handling mechanism.
2.
Performance of
Syndicate Bank, Central Bank of India and Indian Bank was the poorest among all
public sector banks as the mean rank was the lowest i.e. 19.95, 29.65, 29.2.
The total performance score for customer perspective scored low in each year
primarily due to low or declining growth rate of customers’ accounts and low
market share in deposits and credits which may be on account of unsatisfactory
services provided by these banks.
3.
Table 3 shows that
since p-value is 0.000, which is less than 0.05. This implies null hypothesis
is rejected at 5 % level of significance. Hence, there is a significant
difference in the performance of all the ten Public Banks over the mentioned
financial years based on Customer perspective.
Suggestions:
1.
Public Sector Banks are
suggested to renovate their bundle of products and services using the latest
technology and incorporating customer experiences.
2.
These banks should develop
aggressive marketing strategies for promoting their products and services and
attract new customers.
3.
Banks should ensure
smooth, prompt and quality services at front and backend through skilled and
knowledgeable staff so that they can retain existing customers for long term.
4.
Banks should try to
attract customers in low cost CASA deposits through providing additional
facilities and attractive offers on such accounts.
1.2
Inter-Bank Comparison of Performance of Private Sector Banks on Customer
Perspective
Table:4 Performance
Score of Private Sector Banks on Customer Perspective
Table: 5 Mean ranks of
Private Sector Banks
Table: 6Results of
Kruskal Wallis test for Private Sector Banks
|
Chi-Square |
Degree of freedom |
p-value |
|
|
Private Banks |
49.145758 |
9 |
0.000 |
Major
Findings:Table 5 shows that:
1.
HDFC Bank performed the
best on Customer Perspective followed by Axis Bank and Yes Bank as the mean
rank for HDFC, Axis and Yes Bank was the highest among all private sector banks
i.e. 82.2, 68.45 and 62.8 respectively as shown in Table 5.This is primarily
due to highest performance score of these bank on account of their ability to
retain existing and acquire new customers in deposits and credit accounts
through providing efficient services and offering customized innovated and
differentiated products & services. These banks have also the strong
complaints & queries handling mechanism so the customer satisfaction level
is highest with banks. All these three banks enjoys the highest market share
among all private sector banks.
2.
Performance of Federal
Bank, Karur Vysya Bank and City Union Bank was the poorest among Private sector
Banks as the mean rank was the lowest i.e. 21, 22.15 and 23.8 respectively .
Low market share in deposits and credits than competitive banks and low growth
rate of customers are the main reasons for poor performance score on customer
perspective.
3.
Table 6 shows that
since p-value is 0.000, which is significantly less than 0.05. This implies
null hypothesis is rejected at 5 % level of significance. Hence, there is a
significant difference in the performance of all the ten Private sector Banks
over the mentioned financial years based on customer perspective.
Suggestion:
1.
Poor performers among
Private sector banks should try to attract and acquire new customers through
providing more suitable, tech-savvy, updated products & services with
improved business processes.
2.
Private sector banks
should try improve the customer base in CASA accounts through attractive offers
and economical services on such accounts as they are low cost funds and can
improve the profitability of the banks.
3.
More advertisement and
promotional activities should be conducted by the banks to attract customers.
1.3
Inter-Sector Comparison between Public Sector Banks and Private Sector Banks on
Customer Perspective
Table:
7 Average Performance Score of Banks on Customer Perspective
Table: 8 Mean ranks of
the Sectors
|
Sector |
Private |
Public |
Total |
|
N |
10 |
10 |
20 |
|
Mean Rank |
11.1 |
9.9 |
- |
Table: 9 Results of Mann-Whitney U
test
|
|
Mann-Whitney U |
Z-score |
p-value |
|
Score |
44.000 |
-0.454 |
0.650 |
Major
Findings:
1.
Table 8 shows that
Private Sector Banks performed the best than Public Sector Banks on Customer
Perspective of the Balanced Scorecard as the mean rank of private sector banks
is the highest i.e. 11.1 than public sector banks. Strong marketing strategies
, prompt and quality services at front and backend, updated IT infrastructure ,
updated and latest alternative channels for delivering products & services
etc. have enabled private sector banks to attract more customers towards them and
providing satisfactory services to them. High customer base and market share
enabled private sector banks to achieve highest average score on customer
perspective.
2.
Table 9 shows that
since p-value is 0.650, which is greater than 0.05. This implies null
hypothesis is accepted at 5% level of significance. Hence there is no
significant difference in the performance of both public and private sector
banks over the mentioned financial years based on customer perspective.
Conclusion
& Recommendations:
Customer Perspective is one of the
leading perspective of Bank’s Balanced Scorecard. The performance of banks on
this perspective is positively related to financial outcomes as satisfied
customers’ leads to more business for the bank thus leads to high profits.
Customers who are retained by the banks for the long-term, who purchase
multiple products & services, who recommends their bank to their friends
and relatives are helpful in providing superior returns to bank’s shareholders.
A significant difference has been found
among Public Sector banks and among Private Sector banks when an inter-bank
comparison has been drawn and no significant difference has been found the
between Public Sector Banks and Private Sector Banks when an inter-sector
comparison has been drawn.
Following recommendations are given
for banks to improve their performance on Customer perspective:
1.
To increase value to
the customers and for innovative customer experiences, banks should enhance the
use of right and updated digital platforms for providing different banking and
specialty services.
2.
As it is not possible
for a bank to target all the segments of the customers, so bank should target
on a clustering a customer base and try to match its needs with suitable
products & services.
3.
As during the study it
has been found that most of the banks have not yet started conducting or
disclosing customer survey score annually in their reports so banks should
conduct customer satisfaction survey on annual basis and disclose in their
reports to know the feedback of their products and services so that products
and services can be customized accordingly.
4.
Banks are suggested to
incorporate customer satisfaction index, customer retention rate and customer
loyalty rate while designing their individual scorecard.
5.
Banks should adopt
aggressive marketing and promotional strategies like offering unique selling
prepositions, introducing first to market products, market segmentation,
customized products, use of different marketing channels, promoting social
activities etc. to attract new customers and retain the existing ones.
6.
As few banks discloses
data on number of customers in different accounts, it is suggested to all banks
to disclose data on numbers of customer in different accounts so that customer
growth rate and profitability per customer can be ascertained.
7.
For a smooth, prompt
and quality services to customers, efficient and organised knowledge based
solutions should be provided by the trained frontline staff so that bank can
gain the confidence of customers and retain them for long-term.
8.
A right mix of physical
and digital channels should be adopted by the banks as both are required by
different types of customers.
9.
Banks should use
multiple marketing channels to reach to their desired customers and to inform
them about different offers, special incentives, reward points, low rate or
high rate etc. as use of single channel may take away a customer by the
competitive bank.
Future
Scope of the Study:
As this research study is confined
to Public and Private sector banks in India, future studies can be extended to
foreign banks, regional rural banks, small finance banks, other financial institutions
or to other sectors than banking to measure the performance on Customer
perspective of Balanced Scorecard. This research study is based on secondary
data so future studies can include primary data as well on different measures
of customer perspective like customer satisfaction, customer retention or
customer loyalty.
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